These ratings are restated from the Ratings
Report indicated above, which was produced outside the European Union, and
therefore are not issued by The Economist Intelligence Unit credit rating
agency, which is registered in accordance with Regulation (EC) No 1060/2009 of
16 September 2009, on credit rating agencies, as amended. This report and the
ratings, therefore, are not issued pursuant to such Regulation and do not fall
within its scope.

Sovereign risk is CCC-rated. A return to fiscal surplus in 2018 and an increase in foreign-exchange reserves are positive factors. In addition, higher oil prices and a three-year US$5.3bn IMF stand-by arrangement will alleviate concerns about the government's solvency. Nevertheless, ongoing political instability remains a weakness.

Currency risk

The currency risk rating is at B, supported by rising export revenue, an increase in foreign-exchange reserves and the narrowing gap between the official and the market exchange rates. Nevertheless, high dependence on oil exports for hard-currency earnings and the continuing circulation of currency outside official channels remain weaknesses.

Banking sector risk

The rating for banking sector risk is at CCC. Iraqi banks remain underdeveloped and suffer from poor asset quality and low capitalisation. Efforts to improve commercial banks' ability to meet capital requirements will continue, but will remain hampered by political and bureaucratic inertia.

Political risk

Iraq remains deeply divided along sectarian and ethnic lines, and the next government will be weaker and more fragmented. Although the jihadi group Islamic State has lost all of its territory in Iraq, risks still stem from possible conflict between the Kurds and government forces.

Economic structure risk

Iraq's oil-dependent economy has suffered because of comparatively low oil prices during 2014‑17, which have led to large budget deficits. Although a rise in oil prices will move the fiscal position into surplus in 2018, the economy remains highly vulnerable to oil price shocks, as economic diversification will be slow.